There has been a furore in the French press about a leading academic who has admitted that he hasnât read the books he writes about. In his view, it is acceptable to mention a book such as Steppenwolf without having read it, since you can trust to the fact that nobody else has read it either but will not be prepared to admit it.

This cynical approach to literature is also the way in which a large part of the world of finance operates. Take portable alpha. This has become something of a buzz phrase and might be thought of as an iPod for the over-40s. We are told repeatedly that this is something that we really cannot live without, though in reality we have not the slightest idea what it is, what it does or how it works.

To say that the concept of portable alpha is simple is disingenuous. It is simple in itself, but it requires an understanding of some fairly complex financial issues, the acceptance of a certain approach to investment, and the blanket rejection of other, in my view more sensible, asset allocation strategies. It also involves the use of perhaps deliberately confusing language.

Put simply, in this context beta is the return that you could expect to earn by the normal operation of the markets in which you are already invested and alpha is any other return.

If you were invested 100% in UK equities then your beta return would be the total return of FTSE index (ie, the index plus the dividend yield). So what is confusing about that? Well, just the fact that beta is also used in at least two other ways.

First it can be the index return within any particular market, as opposed to the return of picking individual stocks, which will in this context be the alpha.

Second, within the framework of the capital asset pricing model (which is basically a huge con trick upon which insecure foundation rests the whole of traditional finance theory) it is the factor by which the “risk” of any one investment can be calculated, although it can’t really and by the way there is no corresponding meaning of alpha here. You see, it is confusing, isn’t it?

Let’s try to cut through all this. Say you hold a portfolio of UK quoted equities. The pedlars of portable alpha schemes will tell you that rather than holding the shares themselves you can gain the same return at much less cost by buying a derivative product (a FTSE option for example) with some of the money, and then using the rest of the money to invest in a different asset class which is “pure” alpha, ie, is uncorrelated to the FTSE index.

This, it is argued, will gain you an extra return (the alpha return) compared with simply holding the original portfolio. It is the idea of being able to transfer some of your capital into an alpha return that gives rise to the name portable, though strictly speaking it is the capital which is portable, not the alpha itself.

There are various objections which could be made to the definition I have just given, but it seems to me that this approach is fundamentally flawed, not least because it risks confusing two meanings of beta.

The only asset class that exhibits consistently low correlation with the FTSE is UK property, yet this is ruled out since the source of portable alpha must be liquid to facilitate cash calls against the derivative position.

This also excludes asset classes such as private equity.

Second, what guarantee do you have that the source of alpha return will exceed that which you could have earned anyway? This assumption must be implicit in any argument for portable alpha, yet just how realistic is it? Looking at the performance figures, market-neutral funds only outperformed the FTSE in three years out of 11 – and in each of those years the FTSE was heavily negative.

The most obvious problem with portable alpha is this. If you analyse what is being proposed, it is that you should gain the ability to invest some capital in a different asset class by incurring the extra expense of setting up the required derivative position, plus the fees of the clever people who are selling you the scheme and will manage it for you, plus the short-term market risk of having to make cash calls out of an asset that will be fluctuating in value from day to day.

If you want to invest in market neutral hedge funds then why not just go ahead and make an allocation to them?

• Guy Fraser-Sampson is the author of Multi Asset Class Investment Strategy, and an investment columnist.